SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 31, 2001
AFFILIATED MANAGERS GROUP, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 001-13459 04-3218510
-------- --------- ----------
(State or other jurisdiction (Commission file number) (IRS Employer
of incorporation) Identification Number)
600 Hale Street, Prides Crossing, Massachusetts 01965
-----------------------------------------------------------------
(Address of principal executive office)
(617) 747-3300
--------------
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
As disclosed in a Form 8-K filed on November 15, 2001, on October
31, 2001 Affiliated Managers Group, Inc. ("AMG") acquired a majority equity
interest in the business of Friess Associates, LLC and Friess Associates of
Delaware, LLC (collectively, "Friess Associates"). In the transaction, AMG
acquired 51% of Friess Associates for approximately $241.0 million, and
agreed to acquire an additional 19% interest in three years from the majority
selling equity-holder (subject to certain conditions). The remaining equity
ownership of the firm is held by a broad group of Friess Associates
professionals.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
1) Report of Independent Accountants
2) Combined Audited Financial Statements of Friess
Associates, Inc. and Friess Associates of Delaware, Inc.
as of and for the Year Ended December 31, 2000
3) Combined Unaudited Balance Sheet of Friess Associates,
Inc., Friess Associates of Delaware, Inc., Friess
Associates, LLC, and Friess Associates of Delaware, LLC
(collectively, the "Companies") as of September 30, 2001
4) Combined Unaudited Statements of Income of Friess
Associates, Inc. and Friess Associates of Delaware,
Inc. for the Nine Months Ended September 30, 2000 and
of the Companies for the Nine Months Ended September
30, 2001
5) Combined Unaudited Statements of Cash Flows of Friess
Associates, Inc. and Friess Associates of Delaware,
Inc. for the Nine Months Ended September 30, 2000
and of the Companies for the Nine Months Ended
September 30, 2001
(b) Pro Forma Financial Information
1) Introduction to the Unaudited Pro Forma Consolidated
Financial Information
2) Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 2001
3) Unaudited Pro Forma Consolidated Statement of Income for
the Year Ended December 31, 2000
4) Unaudited Pro Forma Consolidated Statement of Income for
the Nine Months Ended September 30, 2001
(c) Exhibits
99.1 Consent of PricewaterhouseCoopers LLP
FRIESS ASSOCIATES, INC.
AND
FRIESS ASSOCIATES OF DELAWARE, INC.
COMBINED AUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 2000
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Friess Associates, Inc. and
Friess Associates of Delaware, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of income and comprehensive income, of changes in
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Friess Associates, Inc. and Friess
Associates of Delaware, Inc. at December 31, 2000, and the results of its
operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Companies'
management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
October 31, 2001
FRIESS ASSOCIATES, INC. AND
FRIESS ASSOCIATES OF DELAWARE, INC.
COMBINED BALANCE SHEET
December 31,
2000
-----------
Assets
Current Assets
Cash and cash equivalents $ 1,137,805
Advisory fees receivable 11,305,683
Accounts receivable 76,596
Investments available for sale, at market 1,867,477
Prepaid expenses and other assets 136,761
-----------
14,524,322
Restricted investments, at market 736,760
Furniture, equipment and leasehold improvements, at cost,
less accumulated depreciation and amortization 1,021,769
Investment in limited partnership, at cost 109,800
-----------
$16,392,651
===========
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 409,678
Accrued pension expense 294,969
-----------
704,647
-----------
Deferred Compensation Liability 46,048
Stockholders' Equity
Common Stock
Friess Associates, Inc. Class A Series 1 voting,
no par value, 1,000 shares authorized, 100 shares
issued and outstanding 65,605
Friess Associates of Delaware, Inc. Class A Series 1
voting, no par value, 1,500 shares authorized, 1,000
shares issued and outstanding 300,000
Additional paid in capital 690,780
Retained earnings 14,089,935
Accumulated other comprehensive income 495,636
-----------
15,641,956
-----------
$16,392,651
===========
The accompanying notes are an integral part of the financial statements.
2
FRIESS ASSOCIATES, INC. AND
FRIESS ASSOCIATES OF DELAWARE, INC.
COMBINED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
Year Ended
December 31,
2000
------------
Revenue:
Advisory fees $ 89,484,844
Investment income 1,271,166
------------
90,756,010
------------
Expenses:
Employee compensation and benefits 23,166,622
Travel and entertainment 1,783,193
Professional services 1,644,275
Occupancy 846,701
Depreciation and amortization 276,018
Loss on disposal of fixed assets 111,803
Other operating expenses 2,758,584
------------
30,587,196
------------
Net income 60,168,814
Other comprehensive income:
Unrealized gains on marketable securities 158,920
Reclassification adjustment for realized gains recognized
as income in the current period (608,015)
------------
Comprehensive income $ 59,719,719
============
Unaudited pro forma information:
Income before tax provision $ 60,168,814
Income tax provision 21,262,317
------------
Unaudited pro forma net income $ 38,906,497
============
The accompanying notes are an integral part of the financial statements.
3
FRIESS ASSOCIATES, INC. AND
FRIESS ASSOCIATES OF DELAWARE, INC.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Other
Common Additional Retained Comprehensive
Total Stock Paid In Capital Earnings Income
------------ -------- -------- ------------ ---------
Balance at January 1, 2000 $ 11,609,893 $365,605 $690,780 $ 9,608,777 $ 944,731
Comprehensive income 59,719,719 -- -- 60,168,814 (449,095)
Distributions (55,687,656) -- -- (55,687,656) --
------------ -------- -------- ------------ ---------
Balance at December 31, 2000 $ 15,641,956 $365,605 $690,780 $ 14,089,935 $ 495,636
============ ======== ======== ============ =========
The accompanying notes are an integral part of the financial statements.
4
FRIESS ASSOCIATES, INC. AND
FRIESS ASSOCIATES OF DELAWARE, INC.
COMBINED STATEMENT OF CASH FLOWS
Year Ended
December 31,
2000
------------
Cash flows from operating activities:
Net income $ 60,168,814
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 276,018
Loss on disposal of property and equipment 111,803
Changes in assets and liabilities:
(Increase) decrease in:
Advisory fees receivable (3,012,274)
Accounts receivable (32,262)
Prepaid expenses and other assets 753,110
Increase (decrease) in:
Accounts payable 36,777
Accrued pension expense 294,969
Deferred compensation liability 46,048
------------
Net cash provided by operating activities 58,643,003
------------
Cash flows from investing activities:
Investment purchases (1,308,016)
Additions to property and equipment (554,326)
------------
Net cash used by investing activities (1,862,342)
------------
Cash flows from financing activities:
Shareholder distribution (55,687,656)
------------
Net cash used by financing activities (55,687,656)
------------
Net increase in cash and cash equivalents 1,093,005
Cash and cash equivalents, beginning of year 44,800
------------
Cash and cash equivalents, end of year $ 1,137,805
============
The accompanying notes are an integral part of the financial statements.
5
NOTES TO COMBINED AUDITED FINANCIAL STATEMENTS
DESCRIPTION OF BUSINESS
The financial statements reflect the combination of Friess Associates,
Inc. and Friess Associates of Delaware, Inc. (together, the "Company").
The Company is registered with the Securities and Exchange Commission as
an investment advisor (under the Investment Advisers Act of 1940) and
with various state regulatory agencies. It provides investment advisory
services to employee benefit plans, nonprofit organizations, individuals
and affiliated mutual funds.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Combination
Material intercompany accounts and transactions have been eliminated in
combination.
Cash and Cash Equivalents
Short-term investments which have a maturity of 90 days or less at the
date of purchase are considered cash equivalents.
Revenue Recognition
The Company's revenues are derived from management and advisory fees
earned from services provided. For institutional and private accounts,
fees are generally billed quarterly and are calculated as a percentage
of actual assets under management at the beginning of the calendar
quarter. For mutual fund clients, fees are billed monthly and are
calculated as a percentage of the fund's average daily net assets.
Investments
The Company classifies all of its investments in marketable securities as
available for sale. Investments in this classification are reported at
their current market value with net unrealized gains or losses being
added to or deducted from comprehensive income. Realized gains and losses
are determined on the highest cost method.
Furniture, Equipment and Leasehold Improvements
Furniture, equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation is provided on a
straight-line basis over the related asset's estimated useful life.
Leasehold improvements are amortized over the shorter of the term of the
lease or their estimated useful lives. Upon sale or retirement, the cost
of the asset and the related accumulated depreciation are removed from
the accounts and the resulting gain or loss, if any, is included in
operations.
6
Deferred Compensation Arrangements
In accordance with Accounting Principles Board Opinion Number 12, the
expense for these arrangements is being recognized over the period of
expected benefit.
Investment in Limited Partnership
The Company has invested $109,800 for a non-marketable minority interest
in a privately held Limited Partnership that is reported on the
financial statements as an asset at its original cost.
Income Taxes
The Company is subject to the provisions specified under Subchapter S of
the Internal Revenue Code, which provide for the income of the Company to
be taxed at the shareholder level. Consequently, the Company has not
included a provision for federal or state income taxes in its
historical financial statements. A pro forma income tax provision
has been provided assuming the Company was organized as a Subchapter C
Corporation.
INVESTMENTS IN MARKETABLE SECURITIES
The Brandywine, Brandywine Blue, and Brandywine Advisors Funds are
mutual funds of which an officer of the Company is a director and for
which the Company serves as the Investment Advisor. These funds comprise
all of the marketable securities owned by the Company at December 31,
2000. The investments are recorded at fair market value.
Brandywine Fund
Fair Market Value $1,477,773
Cost 1,217,255
----------
Unrealized gain $ 260,518
==========
Capital gains & dividend distributions $ 432,666
==========
Brandywine Blue Fund
Fair Market Value $ 877,142
Cost 658,012
----------
Unrealized gain $ 219,130
==========
Capital gains & dividend distributions $ 175,349
==========
Brandywine Advisors Fund
Fair Market Value $ 249,322
Cost 233,334
----------
Unrealized gain $ 15,988
==========
Capital gains & dividend distributions $ --
==========
DEFERRED COMPENSATION
During the year ended December 31, 2000, the Company entered into deferred
compensation arrangements with certain of its employees. Marketable
securities with a fair market value of $736,760 have been pledged and are
shown as restricted investments. The general terms of the arrangements call
for the marketable securities pledged to vest to the benefit of the
affected employees on March 30, 2002 should they still be employed by the
Company at that time. The expense recognized for the year ended
December 31, 2000 was $46,048.
7
AFFILIATED FUNDS
Advisory fees aggregated $60,830,670 for the Brandywine Fund, $4,406,322
for the Brandywine Blue Fund, and $64,604 for the Brandywine Advisors Fund
for the year ended December 31, 2000. Included in advisory fees receivable
at December 31, 2000 are unpaid advisory fees of $4,858,150 from the
Brandywine Fund, $338,240 from the Brandywine Blue Fund, and $22,671 from
the Brandywine Advisors Fund.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consisted of the following
at December 31, 2000:
Furniture and equipment $1,907,114
Leasehold improvements 399,397
----------
2,306,511
Less accumulated depreciation and amortization 1,284,742
----------
$1,021,769
----------
Depreciation and amortization expense for the year ended December 31, 2000
was $276,018.
BENEFIT PLAN
The Company has a defined contribution benefit plan covering substantially
all employees. The Company's annual contribution to the plan equals 15% of
each eligible participant's compensation, up to a maximum contribution of
$24,000 for any participant.
The contribution expense recognized for the year ended December 31, 2000
was $894,969.
OPERATING LEASES
The Company has entered into non-cancelable lease agreements for office
space in Delaware and Arizona. The lease expense recognized for the year
ended December 31, 2000 was $337,200 under an agreement that ended
December 31, 2000.
The minimum lease payments under which the Company is obligated are:
Year Ending December 31,
------------------------
2001 $144,979
2002 116,376
2003 116,179
2004 112,488
2005 44,194
RELATED PARTY TRANSACTION
The Company leased office space from a company owned by a shareholder
under an agreement that ended December 31, 2000. Annual rent under the
lease was $337,200 for the year ended December 31, 2000.
SUBSEQUENT EVENT
On June 1, 2001, Friess Associates, Inc. and Friess Associates of Delaware,
Inc. contributed the majority of their assets and liabilities to Friess
Associates, LLC and Friess Associates of Delaware, LLC, two newly formed
Limited Liability Companies (each, an "LLC"), in exchange for a
participating interest in the LLCs. On October 31, 2001, Affiliated
Managers Group, Inc. ("AMG") purchased a 51% interest in each LLC.
8
FRIESS ASSOCIATES, INC.,
FRIESS ASSOCIATES OF DELAWARE, INC.,
FRIESS ASSOCIATES, LLC,
AND
FRIESS ASSOCIATES OF DELAWARE, LLC
COMBINED UNAUDITED FINANCIAL STATEMENTS
AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
FRIESS ASSOCIATES
COMBINED BALANCE SHEET
December 31, September 30,
2000 2001
------------ -------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,137,805 $ 6,657,794
Advisory fees receivable 11,305,683 9,107,968
Accounts receivable 76,596 40,655
Investments, available for sale, at market 1,867,477 1,452,402
Prepaid expenses and other assets 136,761 329,178
----------- -----------
14,524,322 17,587,997
Restricted investments, at market 736,760 571,779
Furniture, equipment and leasehold improvements,
at cost, less accumulated depreciation and
amortization 1,021,769 939,489
Investment in limited partnership, at cost 109,800 109,800
----------- -----------
$16,392,651 $19,209,065
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 409,678 $ 344,664
Accrued pension expense 294,969 215,303
----------- -----------
704,647 559,967
----------- -----------
DEFERRED COMPENSATION LIABILITY 46,048 357,362
STOCKHOLDERS' EQUITY
Common Stock
Friess Associates, Inc.
Class A Series 1 voting - no par value
Authorized 1,000 shares, issued and
outstanding 100 shares 65,605 65,605
Friess Associates of Delaware, Inc.
Class A Series 1 voting - no par value
Authorized 1,500 shares, issued and
outstanding 1,000 shares 300,000 300,000
Additional paid in capital 690,780 690,780
Retained earnings 14,089,935 16,824,135
Accumulated other comprehensive income 495,636 411,216
----------- -----------
15,641,956 18,291,736
----------- -----------
$16,392,651 $19,209,065
=========== ===========
1
FRIESS ASSOCIATES
COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-----------------------------
2000 2001
------------ -----------
REVENUE
Advisory fees $ 68,080,623 $ 56,501,157
Investment income 455,125 318,484
------------ -----------
68,535,748 56,819,641
------------ -----------
EXPENSES
Employee compensation and benefits 19,109,811 20,011,773
Travel and entertainment 1,078,413 1,055,656
Professional services 1,241,079 894,539
Occupancy 692,865 528,621
Depreciation and amortization 181,125 207,362
Other operating expenses 2,535,168 2,121,255
------------ -----------
24,838,461 24,819,206
------------ -----------
NET INCOME 43,697,287 32,000,435
OTHER COMPREHENSIVE INCOME
Unrealized gain/(loss) on marketable securities 108,821 (84,420)
------------ -----------
COMPREHENSIVE INCOME $ 43,806,108 $31,916,015
============ ===========
UNAUDITED PRO FORMA INFORMATION
Income before tax provision $32,000,435
Income tax provision 11,398,770
-----------
Unaudited pro forma net income $20,601,665
===========
2
FRIESS ASSOCIATES
COMBINED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------------
2000 2001
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $43,697,287 $32,000,435
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 181,125 207,362
Changes in assets and liabilities:
(Increase) decrease in:
Advisory fees receivable (3,723,999) 2,197,715
Accounts receivable (42,469) 35,941
Prepaid expenses and other assets 666,589 (192,417)
Increase (decrease) in:
Accounts payable 161,704 (65,014)
Accrued pension expense 294,969 (79,666)
Deferred compensation liability 311,314
----------- -----------
Net cash provided by operating activities 41,235,206 34,415,670
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (164,418) (125,079)
----------- -----------
Net cash used by investing activities (164,418) (125,079)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Shareholder distributions (38,263,279) (28,770,602)
----------- -----------
Net cash used by financing activities (38,263,279) (28,770,602)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,807,509 5,519,989
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 44,800 1,137,805
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,852,309 $ 6,657,794
=========== ===========
3
COMBINED UNAUDITED FINANCIAL STATEMENTS
Basis of Presentation
On June 1, 2001, Friess Associates, Inc. and Friess Associates of Delaware,
Inc. contributed the majority of their assets and liabilities to Friess
Associates, LLC and Friess Associates of Delaware, LLC, two newly formed
Limited Liability Companies (each, an "LLC"), in exchange for a participating
interest in the LLCs. On October 31, 2001, Affiliated Managers Group, Inc.
("AMG") purchased a 51% interest in each LLC.
The unaudited financial statements presented as of and for the nine months ended
September 30, 2001 reflect the combination of Friess Associates, Inc., Friess
Associates of Delaware, Inc., Friess Associates, LLC, and Friess Associates of
Delaware, LLC (collectively, "Friess Associates"). The combined financial
statements of Friess Associates have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The year-end
condensed balance sheet data was derived from audited financial statements, but
does not include all of the disclosures required by generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair statement have
been included. All material intercompany balances and transactions have been
eliminated. Operating results for interim periods are not necessarily indicative
of the results that may be expected for the full year. The Combined Audited
Financial Statements of Friess Associates, Inc. and Friess Associates of
Delaware, Inc. as of and for the Year Ended December 31, 2000, includes
additional information about Friess Associates, its operations, and its
financial position.
4
AFFILIATED MANAGERS GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION
On October 31, 2001, Affiliated Managers Group, Inc. ("AMG") acquired
a 51% equity interest in Friess Associates, LLC and Friess Associates of
Delaware, LLC (collectively, "Friess") for approximately $241.0 million, a
transaction with related acquisition costs of approximately $2.6 million. AMG
financed the transaction with working capital and borrowings under its senior
revolving credit facility ("Credit Facility").
The following tables set forth AMG's pro forma consolidated
statements of income for the year ended December 31, 2000 and the nine months
ended September 30, 2001 and the pro forma consolidated balance sheet as of
September 30, 2001. The pro forma statements of income reflect the combined
results of AMG and Friess as if the Friess investment occurred on January 1,
2000. The pro forma statements of income also assume AMG's two 2001 financing
transactions (further described in Note (F) of the pro forma statements of
income) were completed on January 1, 2000. The pro forma statements of income
reflect the application of Financial Accounting Standards No. 141 and 142
(FAS 141 and FAS 142) to the Friess investment. The pro forma balance sheet
reflects the combined financial position of AMG and Friess, after giving
effect to the investment in Friess and AMG's recent issuance of mandatory
convertible securities, assuming these events occurred on September 30, 2001.
The investment in Friess will be accounted for under the purchase
method of accounting, whereby the excess of purchase price over the fair
value of assets acquired, including acquired client relationships, is
classified as goodwill. In these pro forma financial statements, we have
assumed an allocation of our purchase price as follows: $7.2 million of
tangible net assets, $15.0 million of other intangible assets subject to
amortization, $80.0 million of indefinite life other intangible assets, and
goodwill of $141.9 million. The allocation of the purchase price assumed in
the preparation of the pro forma balance sheet and the amortization periods
assumed in the preparation of the pro forma income statements are based on
preliminary estimates, and are therefore subject to change based upon the
final valuation.
The pro forma consolidated financial statements should be read in
conjunction with AMG's Form 10-K for the year ended December 31, 2000 and
Form 10-Q for the nine months ended September 30, 2001. The pro forma
consolidated financial statements are presented for illustrative purposes
only and are not intended to be indicative of the results that would have
occurred if the transactions had occurred on the dates indicated or which may
be realized in the future.
AFFILIATED MANAGERS GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS)
Friess Financing
AMG Friess Pro Forma Pro Forma AMG
Actual Actual Adjustments Adjustments (D) Pro Forma
--------- -------- --------- --------- -----------
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 205,064 $ 6,658 $(161,051)(A) $ 115,100 $ 165,771
Investment advisory fees receivable ............. 44,043 9,149 -- -- 53,192
Other current assets ............................ 10,081 268 -- -- 10,349
--------- -------- --------- --------- -----------
Total current assets ...................... 259,188 16,075 (161,051) 115,100 229,312
Fixed assets, net .................................. 14,357 939 -- -- 15,296
Equity investment in Affiliate ..................... 1,616 -- -- -- 1,616
Acquired client relationships, net of
accumulated amortization ........................ 194,996 -- 95,000 (B) -- 289,996
Goodwill, net of accumulated amortization .......... 453,759 -- 130,759 (B) -- 584,518
Other assets ....................................... 24,649 2,195 -- 1,725 28,569
--------- -------- --------- --------- -----------
Total assets ............................... $ 948,565 $ 19,209 $ 64,708 $ 116,825 $ 1,149,307
========= ======== ========= ========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ........ $ 67,196 $ 560 $ -- $ -- $ 67,756
--------- -------- --------- --------- -----------
Total current liabilities .................. 67,196 560 -- -- 67,756
Long-term senior debt .............................. 277,603 -- 83,000(A) 122,000 482,603
Deferred taxes ..................................... 35,551 -- -- -- 35,551
Other long-term liabilities ........................ 13,132 357 -- -- 13,489
--------- -------- --------- --------- -----------
Total liabilities .......................... 393,482 917 83,000 122,000 599,399
Commitments and contingencies ...................... -- -- -- -- --
Minority interest .................................. 20,740 -- -- -- 20,740
Stockholders' equity:
Common stock ..................................... 235 366 (366)(C) -- 235
Additional paid-in capital ....................... 409,588 691 (691)(C) (5,175) 404,413
Accumulated other comprehensive income (loss) .... (1,485) 411 (411)(C) -- (1,485)
Retained earnings ................................ 177,902 16,824 (16,824)(C) -- 177,902
--------- -------- --------- --------- -----------
586,240 18,292 (18,292) (5,175) 581,065
Less treasury stock, at cost ..................... (51,897) -- -- -- (51,897)
Total stockholders' equity ................. 534,343 18,292 (18,292) (5,175) 529,168
--------- -------- --------- --------- -----------
Total liabilities and stockholders' equity . $ 948,565 $ 19,209 $ 64,708 $ 116,825 $ 1,149,307
========= ======== ========= ========= ===========
2
AFFILIATED MANAGERS GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Friess Financing
AMG Friess Pro Forma Pro Forma AMG
Actual Actual Adjustments Adjustments (F) Pro Forma
------------ -------- -------- --------- ------------
Revenues ............................. $ 458,708 $ 89,485 $ -- $ -- $ 548,193
Operating expenses:
Compensation and related expenses . 174,710 23,167 3,446 (A) -- 201,323
Amortization of intangible assets . 26,409 -- 1,000 (B) -- 27,409
Depreciation and other amortization 4,611 276 -- -- 4,887
Selling, general and administrative 68,216 6,297 -- -- 74,513
Other operating expenses .......... 10,327 847 -- -- 11,174
------------ -------- -------- --------- ------------
284,273 30,587 4,446 -- 319,306
------------ -------- -------- --------- ------------
Operating income .............. 174,435 58,898 (4,446) -- 228,887
Non-operating (income) and expenses:
Investment and other income ....... (2,264) (1,271) -- (3,358) (6,893)
Interest expense .................. 15,750 -- 2,938 (C) 4,477 23,165
------------ -------- -------- --------- ------------
13,486 (1,271) 2,938 1,119 16,272
------------ -------- -------- --------- ------------
Income before minority interest
and taxes ........................ 160,949 60,169 (7,384) (1,119) 212,615
Minority interest .................... (65,341) -- (27,794)(D) -- (93,135)
------------ -------- -------- --------- ------------
Income before income taxes ........... 95,608 60,169 (35,178) (1,119) 119,480
Income taxes ......................... 38,952 -- 9,996 (E) (1,156) 47,792
------------ -------- -------- --------- ------------
Net income ........................... $ 56,656 $ 60,169 $(45,174) $ 37 $ 71,688
============ ======== ======== ========= ============
Earnings per share - basic ........... $ 2.54 $ 3.21
Earnings per share - diluted ......... $ 2.49 $ 3.15
Average shares outstanding - basic ... 22,307,476 22,307,476
Average shares outstanding - diluted . 22,748,595 22,748,595
3
AFFILIATED MANAGERS GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Friess Financing
AMG Friess Pro Forma Pro Forma AMG
Actual Actual Adjustments Adjustments (F) Pro Forma
------------ -------- -------- --------- ------------
Revenues ............................. $ 297,722 $ 56,501 $ -- $ -- $ 354,223
Operating expenses:
Compensation and related expenses . 98,369 20,012 (3,512)(A) -- 114,869
Amortization of intangible assets . 20,848 -- 750 (B) -- 21,598
Depreciation and other amortization 4,162 207 -- -- 4,369
Selling, general and administrative 55,601 4,071 -- -- 59,672
Other operating expenses .......... 7,866 529 -- -- 8,395
------------ -------- -------- --------- ------------
186,846 24,819 (2,762) -- 208,903
------------ -------- -------- --------- ------------
Operating income .............. 110,876 31,682 2,762 -- 145,320
Non-operating (income) and expenses:
Investment and other income ....... (3,946) (318) -- (282) (4,546)
Interest expense .................. 9,482 -- 2,204 (C) 602 12,288
------------ -------- -------- --------- ------------
5,536 (318) 2,204 320 7,742
------------ -------- -------- --------- ------------
Income before minority interest
and taxes ........................ 105,340 32,000 558 (320) 137,578
Minority interest .................... (43,027) -- (17,401)(D) -- (60,428)
------------ -------- -------- --------- ------------
Income before income taxes ........... 62,313 32,000 (16,843) (320) 77,150
Income taxes ......................... 24,924 -- 6,063 (E) (127) 30,860
------------ -------- -------- --------- ------------
Net income ........................... $ 37,389 $ 32,000 $(22,906) $ (193) $ 46,290
============ ======== ======== ========= ============
Earnings per share - basic ........... $ 1.69 $ 2.09
Earnings per share - diluted ......... $ 1.65 $ 2.04
Average shares outstanding - basic ... 22,117,858 22,117,858
Average shares outstanding - diluted . 22,683,862 22,683,862
4
The unaudited pro forma consolidated balance sheet as of September 30, 2001
reflects the following adjustments:
(A) Adjustments to long-term senior debt and cash to
reflect a borrowing from AMG's Credit Facility and
the use of cash for the payment of the purchase price.
(B) Allocation of the purchase price, net of tangible
assets, to intangible assets.
(C) Elimination of Friess' equity.
(D) Adjustments to cash and long-term debt to reflect the
issuance of mandatory convertible securities (described
below in Note (F)). AMG used the net proceeds of the
offering to reduce the balance of its Credit Facility
and for other corporate purposes.
The unaudited pro forma consolidated statements of income for the year ended
December 31, 2000 and the nine months ended September 30, 2001 reflect the
following adjustments:
(A) Adjustment to compensation expense to give effect to the
contractually agreed upon expenses of Friess.
(B) Amortization of intangible assets recorded for the
investment in Friess. An estimated $15,000 of
amortizable acquired client relationships are assumed
to be amortized on a straight-line basis over 15 years.
(C) Increase to interest expense for the $83,000 drawn on
the Credit Facility to finance the investment. The
Credit Facility is variable-rate debt; the effect on
interest expense of a 1/8% variance in the interest
rate is $104 for the year ended December 31, 2000 and
$78 for the nine months ended September 30, 2001.
(D) Increase in minority interest to give effect to the
revenue sharing agreement with Friess.
(E) Income tax expense of 40% on the net earnings of Friess
as adjusted for Notes (A) through (D). Previously, no
income taxes were recorded by Friess.
(F) Pro forma adjustments for financing transactions:
(i) adjustment to interest income for the
pro forma cash balance as of September
30, 2001;
(ii) adjustment to interest expense to reflect
$25,000 outstanding on the Credit Facility
on a pro forma basis;
(iii) adjustment to interest expense to reflect
the issuance of zero-coupon convertible
senior notes as if such issuance had
occurred on January 1, 2000. In May 2001,
AMG issued zero-coupon senior convertible
notes due 2021 with a principal amount at
maturity of $251,000. Each security was
issued at 90.50% of the principal amount
at maturity and accretes at a rate of
0.50% annually;
5
(iv) adjustment to interest expense to reflect
the recent issuance of 9,200,000 mandatory
convertible securities as if such
issuance had occurred on January 1,
2000. The securities were priced at $25
per unit, generating gross proceeds of
$230,000, and initially consist of units
including (i) a purchase contract under
which the holder will purchase shares of
AMG's common stock on November 17, 2004
and (ii) 6.0% senior notes due November
17, 2006;
(v) the tax effect of the above.
6
EXHIBITS
99.1 Consent of PricewaterhouseCoopers LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AFFILIATED MANAGERS GROUP, INC.
-------------------------------
(Registrant)
Date: January 14, 2002 /s/ Darrell W. Crate
--------------------
(Darrell W. Crate)
Executive Vice President, Chief Financial
Officer and Treasurer (and also as
Principal Financial and Accounting
Officer)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements of Affiliated Managers Group, Inc. on Form S-3 (File No. 333-71561
and File No. 333-74558) and Form S-8 (File No. 333-72967 and File
No. 333-8445) of our report dated October 31, 2001, relating to the combined
financial statements of Friess Associates, Inc. and Friess Associates of
Delaware, Inc. which appears in the current report on Form 8-K/A of
Affiliated Managers Group, Inc.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 11, 2002
